Inflation
The rate at which the general level of prices for goods and services rises, reducing purchasing power over time.
Inflation measures how much prices increase over a period, eroding the purchasing power of money. When inflation is 3% annually, something that costs $100 today will cost roughly $103 next year.
Central banks typically target low, stable inflation (around 2% in many economies). High inflation reduces real returns on savings and makes long-term financial planning more challenging.
Investments that outpace inflation — such as stocks or inflation-protected bonds — help preserve purchasing power.